Like it or not, artificial intelligence is part of our lives and is only going to increase in consumer and business use in the coming years.

So it makes sense to learn as much as we can about AI to try to discern the best ways in which to invest in this massive trend and be aware of the types of companies that may be left behind.

We have culled the hi-lights from an exhaustive research report from Morgan Stanley in which they identify 11 companies that are beneficiaries of AI.

The research team says these stocks could have an extra nearly 40 per cent upside in the 12 months across the group.

Morgan Stanley also isolates 14 companies that may be challenged in the face of AI innovation.


We start with a look at basic worldwide interest in artificial intelligence based on Google searches the last five years.

The chart below shows how interest in AI was steadily rising before it exploded toward the end of last year as interest soared in the predictive language processing tool, ChatGPT.

AI at an Inflection Point…Consumer Behavior Change and Business Transformation Ahead:

As detailed in Global Technology: How is AI Set to Change the Tech Landscape… and What’s NEXT? we see AI at a point of inflection and expect ramping AI-based innovation to create new digital consumer use cases and changes in behaviour.

We see new/improved search tools, AI assistants, stronger social/e-commerce recommendation engines, next generation content creation tools, more optimized shared economy marketplaces, and more.

We also see significant opportunities for new enterprise top-line drivers and productivity enhancement for both simpler tasks (customer service, client on-boarding) and complex calculations (coding, robotics, logistics routing, etc).

In effect, we see AI accelerating digital transformation and tech diffusion across the economy.

A $5.9 trillion US Offline AI Revenue Opportunity Across the Internet Industry:

While the consumer Internet space has delivered strong growth over the past two decades (online advertising/e-commerce grew at 16%/18% compound annual growth rates (CAGRs)) the offline runway is still long.

Our base models imply there is still over $5.9 trillion of US offline spend (across advertising/e-commerce/travel/shared economy/cloud) to be digitized.

We see surging and emerging consumer AI adoption driving further increases in digital behaviour and more durable multi-year digital revenue and free cash flow growth across the industry.

Indeed, our AI-bull case shows how more rapid digitization could shift an incremental $200bn+ of US spend online over the next 3 years.

What’s NEXT Within Online Advertising, E-commerce, Travel/ Shared Economy, and Video Games?

While the largest tech plat-forms – Alphabet (GOOGL), (AMZN), Meta Platforms (META) – with leading scale, unique data sets and an ability/willingness to invest are best positioned here, the investor opportunity set is larger.

Our NEXT framework assesses the potential for AI to drive (N)ew Business Opportunities, (E)fficiencies, E(X)ternal Productivity and Con(T)ent Creationacross the economy.

We combine this with our analysis of companies’ data quality/scale and ability/willingness to invest to assess relative AI beneficiaries.

We Identify 11 AI Beneficiaries and See ~6% to 38% AI-Driven Upside Across The Group...
We detail 11 companies uniquely positioned to drive and benefit from the AI transformation ahead.
The leading platforms (GOOGL/AMZN/META) headline this list, and we show how AI-based advances (incremental revenue and opex efficiencies) could drive ~10%+ upside to our current price targets.
We also see Shutterstock (SSTK), Trade Desk (TTD), Unity (U), Roblox (RBLX), Etsy (ETSY), Uber (UBER), DoorDash (DASH), and Farfetch (FTCH) structurally benefiting from AI advances and see ~6% to 38% upside to our current price targets across this group.
..And 14 Companies Likely More Challenged Going Forward:
We see the value of scale and unique data rising because of AI and see a higher importance on willingness/ability to invest aggressively in more expensive AI-driven models/tools.
As such, we identify 14 relatively sub-scale companies with likely more limited ability to invest that may face incremental competitive challenges going forward.
These include Lyft (LYFT), Playtika (PLTK), SciPlay (SCPL), Yelp (YELP), Compass (COMP), FIGS (FIGS), Nextdoor (KIND), Mytheresa (MYTE), Playstudios (MYPS), Quotient (QUOT), Wheels Up (UP), Innovid (CTV), ThredUp (TDUP) and RealReal (REAL).
Even 20+ Years In, Consumer Digital Penetration is in Early Innings:

In 2000, US online advertising spend was roughly $8bn per year (~5% of the total $160bn spend on advertising) while US e-com-merce spend was only ~$28bn, or around 2% of total adjusted retail sales.

We’ve come a long way over the past 2+ decades – online advertising/ e-commerce having grown at ~16%/18% 2000-2022 CAGRs, reaching ~$212bn/$1tr.

But the growth runway remains long and new industries (like ride share and food delivery) are adding further to the consumer Internet opportunity.

Indeed, we still see over $5.9 trillion of offline US consumer spend to be digitized…speaking to the runway that new technologies and offerings can thrive on and digitize going forward.

Consider that digital penetration is still only ~21%/23% for online advertising and e-commerce.

Travel online penetration is higher (~76%), but ride-share is significantly lower (~8%).

Image: Courtesy U.S. News & World Report


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